1
10x10
Cable’s Lost
Generation
— John Gilles
VP Engagement, Method
So it’s war!
At stake is the future of television and billions of
dollars in revenue. It’s the battle to define the future landscape of digital communications. So who
wins, who loses and who gets wiped off the map?
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A
Battle
Royale
— John Gilles, VP Engagement, Method
1
At this
Year’s CES
Victor -vsVanquished
David -vsGoliath
Cable’s Lost
Generation
They called it the “Battle Royale” of media and entertainment. This year’s CES pitted Internet video upstarts like Hulu,
Roku, and Boxee in a cage match against industry stalwarts
such as Comcast and Time Warner. At stake: the hearts and
minds of millions.
It was spun as a victor-versus-vanquished battle. It was either
going to be Internet video’s David hoisting aloft the head of the
Goliath that is cable TV, or cable mowing down Hulu and the
others like so much other Internet road kill.
At first glance, it appears that David is a stone’s throw from
victory. The ever-crucial 18- to 24-year-old viewer, who spends
$11 billion a year on entertainment, no longer watches TV as we
know it. They are Cable’s Lost Generation. However, it turns out
that they may not be as lost as we think.
Growth in Pay-TV, which includes cable, DBS such as DirecTV,
and IPTV like Verizon FiOS, has slowed to its lowest rate on
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record, according to Sanford C. Bernstein & Co. Wall Street
analysts are looking for evidence of cord cutting among cable
subscribers in favor of Internet television, but have not found a
clear trend. In fact, it seems that Pay-TV subscribers are a loyal
lot who would rather give up dry cleaning and imported beer
than go without their Mad Men episodes.
So it is not cord cutting that cable has to worry about. Lost in
all the hype over the battle for the living room is the simple fact
that young, new subscribers are not replacing older subscribers.
As they leave college or their parents’ homes to start their own
households, the only subscription they want is broadband. Cable’s Lost Generation is the first to be raised on the Internet, and
they are more than happy to entertain themselves with a highdef Blu-Ray, a PS3, Apple’s Jesus tablet, or with a fuzzy desktop
video pulled off a torrent site. The opportunity for brands and
content owners, therefore, rests with access that is not fixed to
a particular network, device, or context, but encourages multiple
points of consumption, be they fixed or mobile.
10x10
Cable’s Lost
Generation
— John Gilles, VP Engagement, Method
Method Inc
10x10
Round
David vs
Goliath
Hulu
Boxee
vs
Comcast
Time Warner
According to Boxee CEO, Avner Ronen, the average Boxee
user is not someone who canceled his or her cable subscription to move to over-the-top television (OTT)—it is someone
who has never had cable in the first place.
1
Cable’s Lost
Generation
Entertainment
Consumption
— John Gilles, VP Engagement, Method
76
%
58
%
of homes in the United States
have internet access
10
%
and
of 18-24 year olds have a
home entertainment system
of United States population
is 18-24 year olds
38
%
4
%
of young adults
pay for Netflix
of annual entertainment spent
in the United States is from
18-24 year olds
Ronen says that there is a growing legion of recent college
graduates who have never had cable, do not see the need to
pay for it, and are perfectly adept at finding what they want to
see through alternative channels. The Nielsen numbers back up
Ronen. For at least the past five years, the young male demographic has virtually dropped off the map of television, and initial
speculation was that they were too busy playing video games
to watch TV. Now we know the truth—these young householders are consuming vast amounts of TV content, just not in the
traditional sense.
The inviolable cable industry has good reason to be concerned.
These Internet Natives are a desirable bunch for marketers;
they represent over 30 million people in the US who spend $230
billion a year. Advertisers such as Sony, Xbox, and AnheuserBusch have found this missing demographic using multiple platforms, and other established content owners are also moving in
the same direction. For example, Scripps Networks, the parent
company of the Food Network and HGTV, recently launched
Food2 as an OTT video network aimed directly at the young
and content hungry consumer.
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Young
Adults
This chart illustrates the influence that
young adults have on the entertainment
industry, particularly in regards to
over-the-top use.
And they are not the only ones. Marketers who study the Nielsen
ratings are looking past cable and broadcast TV to find that
hard-to-reach demographic, and they are carefully watching OTT
video brands like Revision3’s popular Diggnation show. The old
world was built around a handful of media players profiting from
limited choice. In a world that now demands unlimited choice,
the vast availability of real time content from numerous providers, next generation media, and a multitude of platforms have
obfuscated the landscape. For marketers who want to reach that
18 – 24 audience, 30-second spots on TV are no longer a safe
bet. However, this presents a huge opportunity for the savvy
brand owner who knows how to optimize their use of these
alternative channels to attract distinct audiences with
different expectations.
10x10
Cable’s Lost
Generation
— John Gilles, VP Engagement, Method
20
$60 billion
by 18-34 year olds, or 20%
of entertainment spending
was from18-34 year olds,
or $46 billion
$11 billion
by 18-24 year olds, or 4%
General
Population
4
%
vs
$300 billion
is spent annually on entertainment in the US
of entertainment spending was from
18-24 year olds, or $11 billion
Young
Adults
$300
billion
%
In a new report by category analyst Colin Dixon, entitled “TVE vs.
OTT – Are You Ready for a Throwdown?” Dixon and his colleagues
heralded CES as the beginning of the battle between OTT and TVE,
but also emphasized that consumers are avidly interested in both
options and are willing to vote with their wallets.
We predict that there is an emergent market to curate, distribute,
and monetize content and that it is wide open for game changing innovations that deliver these new streams across multiple platforms.
For the entire industry, at stake is the future of TV, advertising, and
literally billions of dollars in revenue.
“A significant number of Pay-TV subscribers are telling us they want
TV services over their broadband connections,” Dixon told us when
we caught up with him at CES. “They’re willing to pay for mobility
and if they can’t get it from their Pay-TV provider, they will certainly
look elsewhere.”
Either way, consumers win big, because whichever side they
choose they are going to get greater convenience, more content,
and better experiences. Most advertisers and industry players
will likely attempt to reach consumers through both TVE and OTT
services. The twin factors of choice and competition will reward
consumers with improved convenience, abundance, and quality
experiences, giving them what they want, wherever they want it.
When Time Warner Cable announced its TVE initiative, offering
Pay-TV subscribers full-episode content on computers, phones, and
even TVs through IP cloud services, it was a reaction to the sudden
availability of premium full-episode content on new services such as
Hulu, Roku, and Boxee.
Category buster Boxee has led the way to OTT. In line with a recent
study by Bain & Co. that showed the most recommended company
in any given category grows 2.5 times the category average, Boxee
users are fanatical about the service and advocate it, which makes
it the most likely service to be used as a true cable replacement.
Mostly for a younger, early-adopter demographic, the majority of
its members are true Internet Natives who have never had cable.
Meanwhile, “grown-up” organizations like the BBC and PBS are offering full episode TV over the top via the iPlayer and the PBS Video
Portal, respectively.
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The opportunities are too many to enumerate. For brands, it is not
so much about picking the winning pony, but finding those missing
kids. The young, Internet-savvy demographic is highly sought after,
and when you cannot reach them with 30-second spots, it becomes
that much trickier to get their attention. The good news is that we
now know where Nielsen’s missing demographic went. The kids are
all right—for now, they are just going over the top.
Disclaimer: Boxee, Cablevision, Comcast, BBC, PBS, Scripps Networks,
and Time Warner Cable are current or recent Method clients.
10x10
1
Cable’s Lost Generation
By John Gilles, VP Engagement
About the Author
John Gilles is an internationally recognized expert on digital media. A pioneer
in hybrid web/TV content experiences,
Gilles is now focused on developing new
brand experiences across video games,
the Internet, television, virtual worlds
and other media.
More to
come
This is the
First Issue
next
Unlocking the
Infinite Library
About 10x10
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2010 marks Method’s 10 year anniversary, and we are only looking forward.
Written by our own industry leaders, we
are launching the 10x10 series, which will
focus on game changing topics that will
fundamentally impact today’s brands and
their search for new revenue streams.
2
Unlocking the Infinite Library
3
Turn Me On, Touch Me Everywhere
4
Mind the Gap
5
Parenting 101
6
Hey, You, Get Onto My Cloud
7
The Consumer as King(pin)
8
Wrap It, Pack It, and Stack It
9
Power to the People
10
Welcome to the Metaverse
10x10
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About Method
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For more information visit www.method.com.
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